Barclays announces disposal of Italian mortgage portfolio

In a notice to the London Stock Exchange, Barclays PLC announces a transaction under which Barclays Bank Ireland PLC intends to dispose of its performing Italian mortgage portfolio. “The transaction is expected to be financed via a securitisation. Funds and accounts managed by GoldenTree Asset Management LP have entered into a commitment letter under which they will purchase certain notes to be issued by a newly incorporated entity, Miltonia Mortgage Finance S.r.l. (“Miltonia”), to which the Portfolio is expected to be transferred. Upon completion, the Barclays group will hold the most senior class of notes to be issued by Miltonia in addition to the percentage of notes it is required to retain to comply with its regulatory risk retention obligations. The transaction values the Portfolio at approximately EUR 3.3 billion: as a result of the proposed securitisation, Barclays will receive cash proceeds of approximately EUR 400 million, including a small deferred consideration element paid from cashflow generated from the Portfolio, in addition to the most senior class of notes referred to above. The consideration will be used for general corporate purposes. Subject to satisfaction of certain conditions and finalisation of the transaction documentation, settlement of the consideration and completion of the sale is expected to occur during Q2 2024. Upon completion, the Portfolio will continue to be serviced by Barclays Europe for a transitional period. At the end of this period, it is intended that servicing of the Portfolio will be transferred to a third-party long-term servicer. The gross asset value of the Portfolio is expected to be approximately EUR 3.5 billion at completion, and the Portfolio generated a pre-tax loss of EUR (20) million in the year to 31 December 2023. As previously disclosed during the Barclays investor update in February 2024, the transaction is in line with Barclays’ ambition to simplify Barclays and support its focus on growing its key businesses. The transaction is not expected to impact the planned financial distributions of Barclays. The transaction is expected to generate a pre-tax loss of approximately EUR (260) million1 for the year to 31 December 2024, and release approximately EUR 0.9 billion of risk-weighted assets at completion. The Portfolio represents the majority of Barclays’ overall Italian retail mortgage book and the transaction is expected to be broadly neutral to Barclays’ CET1 ratio. Barclays will provide a further update in due course, as appropriate. In addition, Barclays is in discussion with certain third parties in respect of the potential disposal of the remaining non-performing and Swiss-Franc linked Italian retail mortgage portfolios. Should such transactions occur, they are together expected to generate a small pre-tax loss on completion, but also be broadly neutral to Barclays’ CET1 ratio,” the notice stated.